Free Response to Motion - District Court of Colorado - Colorado

Case 1:04-cv-00865-REB-CBS

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So the IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

Civil Action No. 04-cv-0865-REB-CBS ESTATE OF APRIL HILL, SCOTT HILL, personal representative; SCOTT HILL, as Conservator of the Estate of Katelyn Hill; and SCOTT HILL, individually, Plaintiff, v. ALLSTATE INSURANCE COMPANY; LIZ MARCHAND; MERASTAR INSURANCE COMPANY; and PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant.

PLAINTIFF'S OPPOSITION TO DEFENDANT ALLSTATE INSURANCE COMPANY'S MOTION FOR LEAVE TO FILE SECOND AMENDED ANSWER AND COUNTERCLAIM Plaintiff Estate of Katelyn Hill (Plaintiff), by and through its attorneys, responds in opposition to the motion to file the Second Amended Answer and Counterclaim filed by Defendant Allstate Insurance Company (Allstate), because Allstate's request does not meet the Tenth Circuit's standards for late amendment of pleadings. I. Introduction

Plaintiff sued Allstate in March, 2004, to obtain extended Personal Injury Protection (APIP) benefits for injuries incurred in an accident in which Katelyn Hill was a passenger in a vehicle insured by Allstate. (Compl. ¶¶ 1-20, Am. Compl. ¶¶ 9-12, 16.) Allstate filed for leave to amend its answer, add counterclaims for fraud, and file a third-

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party action against one of its named insureds on July 1, 2005. Oral argument on that motion is scheduled for September 9, 2005. Allstate now requests leave, under Fed. R. Civ. P. 15(a), to amend its Amended Answer, which has not been yet filed or approved for filing, to add additional affirmative defenses for offsets. (Allstate's Mot. for Leave to File Second Am. Ans. and Counterclaims. (Def.'s Br.) at 2.) Allstate's Leave to File a Second Amended Answer should be denied for several reasons. First, setoff is a right to reduce a payment by the amount owed by the payee to the payor. Plaintiff does not owe Allstate anything, so there is nothing to offset, and no need to amend the answer to add these defenses. That issue is not a live defense. Second, Allstate's proposed Second Amended Complaint contains fraud-based defenses and counterclaims which have not been approved for filing. Allstate should not be allowed to slip fraud-related defenses and claims into the Answer by amending the as-yet-unallowed Amended Answer. Third, Federal Rule of Civil Procedure 16(b), not 15(a), controls amendment of pleadings after scheduling orders have been entered, and Rule 16(b) requires a showing of good cause. Fed. R. Civ. P. 16(b). Allstate can not show good cause under Rule 16(b) because there is no reason to add setoff defenses when there are no monies owed to Allstate. Because there is nothing for Allstate to setoff, and Allstate should not be allowed to use a non-existent setoff to amend fraud-based claims into the Answer, and therefore Allstate can not show good cause under Rule 16(b), Allstate's motion for leave to file its Second Amended Complaint should be denied. II. There Is No Reason To Amend The Complaint To Add Setoff Or Reduction Defenses Because There Is Nothing To Setoff Or Reduce "The right of setoff `allows entities that owe each other money to apply their mutual debts against each other, thereby avoiding the "absurdity of making A pay B

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when B owes A."'" United States v. Myers (In re Myers), 362 F.3d 667, 672 (10th Cir. 2004) (quoting Citizens Bank v. Strumpf, 516 U.S. 16, 18 (1995) (quoting Studley v. Boylston Nat'l. Bank, 229 U.S. 523, 528 (1913))). Allstate claims that "setoff is not a defense that is waived if not pleaded in the answer," citing Dixson v. Newsweek, Inc., 562 F.2d 626, 633 (10th Cir. 1977) and Moore v. Subaru of America, 891 F.2d 145, 1451 (10th Cir. 1989). (Def.'s Br. at 2 (emphasis in original).) What those cases

actually determine is that whether a setoff against an existing settlement is to be allowed is a matter for the court, not the jury, to decide. Moore, 891 F.2d at 1451; Dixson, 562 F.2d at 633. In both of Allstate's cited cases, the issue was whether a defendant that proceeded to trial had a right of setoff against a previously settling defendant, as in both cases, one defendant had settled out of the case early. Moore, 891 F.2d at 1447; Dixson, 562 F.2d at 628. There are no settlements in this case, there are no settlements in the Western Door case, and there is no money owed to Allstate. Therefore, there is no reason to amend the Answer to add setoff defenses. The issue is premature, not ripe and not an active, available defense at this point. III. Even If This Court Determines Plaintiff's Recovery Is Subject To Setoff Or Reduction, Allstate Should Not Be Allowed To File Its Second Amended Answer As Written, Because It Includes Fraud-based Defenses And Counterclaims That Have Not Yet Been Allowed Allstate's motion requests leave to file its attached proposed Second Amended Answer. (Def.'s Br. at 1, 3.) The proposed Second Amended Answer includes

affirmative defenses twenty-three and twenty-four (2d Am. Compl at 14), and the First, Second, and Third counterclaims (id. ¶¶ 16-24.) These fraud-based affirmative

defenses and counterclaims have been briefed, and are set for oral arguments on September 9, 2005. (Min. Order of Aug. 30, 2005.) These fraud-based affirmative defenses and counterclaims are independent from any possible future setoff. Allstate

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should not be allowed to use a setoff or reduction defense as a manner of introducing fraud-based affirmative defenses and counterclaims. If this Court determines that either of Allstate's setoff or reduction defenses may be added to the Complaint via amendment, Allstate should not be allowed to file its Second Amended Answer and Counterclaims, rather, it should be required to file an Amended Answer that adds nothing but any allowed setoff defense. IV. Leave To Amend Should Be Denied Under Rule 16(b) Because Allstate Can Not Show Good Cause Under Federal Rule of Civil Procedure 16(b), amendments to scheduling orders can only be made on a showing of good cause. Fed. R. Civ. P. 16(b). To show good cause under Rule 16(b), the requesting party must show that it could not meet courtordered deadline despite diligent efforts. Marcin Eng'g, LLC v. Founders at Grizzly Ranch, LLC, 219 F.R.D. 516, 521 (D. Colo. 2003). See also Notes of Advisory

Committee on 1983 Amendments to Rule 16 ("[T]he court may modify the schedule on a showing of good cause if it cannot reasonably be met despite the diligence of the party seeking the extension.") Thus, the focus of a showing of good cause under Rule 16 is the diligence of the requesting party. In this case, there is no reason to grant leave to amend the Complaint, because there is no diligence to thwart, given that there are no funds to setoff. If Allstate should later sue Plaintiff and get a judgment showing that Plaintiff owes Allstate, only then will Allstate have cause to request a setoff. Such a claim has no place in this action, however, and can not constitute good cause to allow such a late amendment of the pleadings. V. Conclusion

Allstate's request to amend its answer to add affirmative defenses for setoff or reduction should be denied because there are no funds to setoff, and Allstate should not

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be allowed to use such a ruse to incorporate fraud-based defenses and counterclaims that are independent of any setoff or reduction, and that Allstate has not been granted leave to add. Allstate's request for leave to file its Second Amended Answer and

Counterclaims can not meet a showing of good cause under Rule 16 because there is no reason to add a setoff of non-existent funds. Plaintiff respectfully requests that

Allstate's Motion for Leave to File Second Amended Answer and Counter Claim be denied. Respectfully submitted this 7th day of September, 2005.

By: _s/Co Horgan________ Robert B. Carey Co Horgan Hagens Berman Sobol Shapiro, LLP 2425 East Camelback Road Suite 650 Phoenix, AZ 85016 (602) 840-5900 FAX: (602) 840-3012 Cindy R. Ten Pas The Carey Law Firm 2301 East Pikes Peak Avenue Colorado Springs, CO 80909 (719) 635-0377 Kenneth A. Senn Law Offices of Kenneth A. Senn 3620 Oakhill Drive Titusville, FL 32780 Attorneys for Plaintiff

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CERTIFICATE OF SERVICE (CM/ECF) I hereby certify that on September 7, 2005, I electronically filed the foregoing with the Clerk of the Court using the CM/ECF system which will send notification of such filing to the following e-mail addresses: Alma M. Lugto ([email protected]) John Mark Vaught ([email protected]) Michael D. Alper ([email protected]) Meghan Frei Berglind ([email protected]) Terence M. Ridley ([email protected]) Attorneys for Defendant Allstate Insurance Company Alan E. Popkin ([email protected]) David W. Sobelman ([email protected]) Elizabeth L. Morton ([email protected]) Gregory Scot Tamkin ([email protected]) Michael K. Alston ([email protected]) Attorneys for Defendant Merastar Insurance Company Clifton J. Latiolais, Jr. ([email protected]) Attorney for Defendant Prudential Insurance Company of America Cindy Rae Ten Pas ([email protected]) Kenneth Alan Senn ([email protected]) Robert Bruce Carey ([email protected]) Attorneys for Plaintiffs and I hereby certify that I have emailed the document to the following non email CM/ECF participant in the matter: Marian Elizabeth Lokey ([email protected]) Attorney for Defendant Merastar Insurance Company s/Co Horgan Co Horgan, Esq. Hagens Berman Sobol Shapiro LLP 2425 E. Camelback Rd. Suite 650 Phoenix, AZ 85016 Telephone: (602) 840-5900 FAX: (602) 840-3012 E-mail: [email protected] Attorney for Plaintiffs

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